Late Payments on a Costa Rica Loan: What They Actually Cost

Most borrowers find out what a late payment costs after they have made one. It is worth knowing before, because in private lending the arithmetic is different from a bank credit card and the consequences arrive faster.

What actually happens when a payment is late

Three things, and they stack:

Default interest starts running. Costa Rican law calls this interés moratorio — an additional rate that applies to the overdue amount, on top of the ordinary interest you already owe. It is set in your loan document, so the exact number is in the paper you signed.

A late fee may apply. Whether one does, and how much, is again a matter of what the loan document says rather than a national standard.

The lender starts recalculating. This is the part borrowers underestimate. A private lender is not a call centre. One late payment on a file that has otherwise been clean is a question. Three in a row is a pattern, and patterns are what push a file toward enforcement.

Read your own document before you need to

Four clauses decide how much room you actually have, and it takes ten minutes to find them:

• The grace period, if there is one, and how many days it runs.
• The default interest rate and what balance it applies to.
• The acceleration clause — the wording that lets the lender demand the entire balance rather than the missed instalment. This is the one that turns a small problem into a large one.
• How the security is enforced: registered mortgage through the courts, or guarantee trust with the route already written into the document.

If you cannot find these, ask your lender to point them out. A lender who will not is telling you something.

The mistake that costs the most

Not paying is a problem. Not saying anything is a much bigger one.

A lender who is being ignored has to assume the worst and act accordingly. A lender who receives a message saying the payment will be eleven days late and why, before the due date, usually has no reason to escalate. That is not a courtesy — it is the difference between a note in a file and a lawyer.

The message does not need to be elaborate. What is happening, when it resolves, and what you are proposing in the meantime.

If it is more than a one-off

Be honest with yourself about which of these you are in:

A timing gap. A sale that slipped, an invoice that has not landed, a season that runs late. Solvable, and usually with a short restructure — interest-only for a few months, or a revised maturity.

A structural gap. The income that was meant to service this loan is not coming back. No restructure fixes that; it only postpones the same conversation with more interest attached. The right move is usually to sell while you still control the sale, or to refinance if the equity supports it.

Both of those get harder every month, because every month of default interest eats into the equity that funds either exit.

How we structure loans to avoid this

Our loans run from $50,000, at 9% to 16% annually, over six months to three years, and at up to 50% of appraised value — most files close between 30% and 40%. Interest-only is common, so the monthly payment is predictable.

Before we approve anything we ask how the principal comes back: sale, refinance, incoming capital, or business cash flow. That question exists to keep borrowers out of this article. A loan with no named repayment source is a loan that ends in a difficult conversation, and we would rather have the difficult conversation at the start.

Related reading: what a foreclosure in Costa Rica actually involves, refinancing a property-backed loan and how private lending interest rates are set

Talk to us about your situation

WhatsApp us at +506 4001 6413, call 855-562-6427 from the US or Canada, or email info@gap.cr.

Four things let us give you a real answer instead of a brochure: the folio number of the property, roughly what it is worth, how much you need, and how you plan to pay it back. With that we can tell you straight away whether the file works and in what range, at no cost.

And if it does not fit, we will say so. We would rather save you the time.

Article by Glenn Tellier (Founder of CRIE and Grupo Gap)